So Hum Bharat Digital aims to the address the “white spaces” within the customer segment that are currently not addressed and in spending categories where physical cash is still widely used, says Navin Surya, chairman emeritus of the Payments Council of India and chairman of the Fintech Convergence Council. “Our payments solutions are focused to take the current digital payments customer base from 100 million at present to the next 500-600 million and increasing [the share of digital payments] retail consumption spends from 18% to 50-60%,” he told MediaNama.

Set up by Surya and Infibeam Avenues’ executive director, Vishwas Patel, So Hum will apply for a New Umbrella Entity (NUE) licence under the Reserve Bank of India’s (RBI) framework for a new umbrella retail payments organisation. While several banks, multinational companies and corporate groups also plan to apply for an NUE license, Surya and Patel are the first to set up an entirely new entity to rival the National Payments Corporation of India (NPCI).

‘Penetration of digital payments is a demographic issue’

“There is no single reason why payments has not penetrated beyond the top 100 million consumers. Every consumer segment needs a different value proposition, payments is not necessarily a geographical issue but a demographic issue,” Surya said. “As you go down to the next set of customers, the similarities between the customers keep reducing compared to the top 100 million customers who are similar in their behavior. Different people have different needs, different use cases and different ways they transact in the commercial environment. Therefore, there is need for a different kind of ecosystem that needs to be digitised,” he said.

“The challenge with the banks is that many customers are inactive or  In the next 300-400 million customer segment, most customers get paid in cash, they have a hand-to-mouth existence so money churns out quickly from their account, which means that their connect with a bank is far less and therefore, the relevance of digital payments goes away. So it is a question of how you get to the next set of customers and who are the best partners who have access to these customers,” Surya said.

“We need to look at expanding payment services through companies that are well-connected with these customers, beyond the banks, such as micro-finance institutions, health insurance and others like telcos. For every product there is a way to roll it out and the role different ecosystem players can play,” he added.

‘Collaborating with partners in the interim’

“Currently, our thought process is to be an operator of the payments’ platforms and ideally, unless something is critical, not get into the operations of the products. The role of So Hum will be to set up payments platform and create an ecosystem. Just as we have to ensure our platforms and inter-operable with NPCI’s platforms, I think if we create similar platforms or something new which gets approved by the RBI, others will need to interoperate with out platforms as well,” Surya said.

While the RBI has invited applications for an NUE licence by February 26, 2021, it will approve the licence(s) within a period of six months. “At this stage, a lot of the work is on the thought-process and we will be working closely with our partners, advisors and consultants through a collaborative manner. We can expect the NUE(s) to go live somewhere in July 2022, given the timelines set by the RBI,” Surya said.

‘Strategic investors will include fintechs and payment companies’

Under the RBI’s guideline, the NUE will need to have minimum paid-up capital of ₹500 crore and at the time of making an application for the licence it should demonstrate that it has a minimum of ₹50 crore of capital. “The promoters have committed ₹52 crore as of now and we plan to raise close to ₹600 crore. For the remaining funds we are in touch with some fintech founders, strategic investors like payment companies, fintechs, companies based on the use-case, banks that have a fintech focus and eventually even financial investors,” Surya said.

‘Regulations should ensure there is a level playing field’

If the RBI provides more than two licences under the NUE framework, there could be a total of three retail payments umbrella entities, including the NPCI, in the country which means that the RBI may bring in a new set of regulations. Specifically, if an NUE develops a retail payments solution on similar lines to any of the NPCI’s platforms like Bharat Bill Payments System (BBPS) or the Unified Payments Interface (UPI), the RBI’s NUE framework mandates that the new retail payments solutions will need to interact and be interoperable, with the systems operated by NPCI.

“Regulations cannot be entity-wise, irrespective of whether you are new or old, as there has to be a level-playing field. The specific challenge I foresee is how new payments products will have to fit into existing regulations. In the case of NPCI, when they introduce a change in UPI they need RBI approval,” Surya said. He explained that regulations today are based on a hierarchy and since the NUE will operate under conditions set by the RBI, it will need take approval from the RBI whenever a new payments solution is launched. “So it is not necessary that the regulations are restricted to the platform level and not the product level, you will have both,” Surya said.

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